Programme: MBA Semester-III (CBCS- OUTCOME BASED)

Elective: Financial Management FM1: Investment Analysis & Portfolio Management

Module 5 : Portfolio Management

Sharpe’s Performance Index:

St = Rp –Rf
σp

Sharpe Index = Portfolio Average Return – Risk Free Rate of Interest

Standard Deviation of the Portfolio Return

1) The details of two hypothetical fund A & B are given below:

Mutual Average Annual Riskless Rate Standard

Funds Returns of Interest Deviation
A 0.0879 0.05 0.0829
B 0.1347 0.05 0.1982

2) The Following information is provided regarding the performance of the

funds namely Birla’s Advantage, Sundaram Growth and Sun F & C Value
for a period of six months ending august 2020. The risk free rate of
interest is assumed to be 9%. Rank them with the help of Sharpe Index

Mutual Funds Average Annual Returns Standard Deviation

Birla’s Advantage 25.38 4
Sundaram Growth 25.11 9.01
Sun F & C 25.01 3.55

3) Mr. Anand is having units in a mutual fund for the past three years. He
wants to evaluate its performance by comparing it to the market.
Particulars Fund Market
Returns 70.60 41.40
Standard Deviation 41.31 19.44
Risk Free Rate 2% 2%

4) Nithya firm is trying to decide two out of the four investment funds. From
the past performance, they were able to calculate the following average
returns and standard deviation of these funds. The current risk free rate
of interest is 9%. Calculate the Sharpe Index Compare the performance of
given below funds.

Alpha Beta Gama Theta

Particulars
Fund Fund Fund Fund
Average Returns 17 18 16 14
Standard Deviation 19 20 13 12

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 Programme: MBA Semester-III (CBCS- OUTCOME BASED)
Elective: Financial Management FM1: Investment Analysis & Portfolio Management
Module 5 : Portfolio Management

5) Calculate Sharpe Ratio on the basis of the following data given regarding
four portfolios.

Portfolio Expected Rate of Return SD of returns from Portfolios

A 11% 6.00
B 14% 7.50
C 10% 3.00
D 15% 9.00
The expected return on the market portfolio is 8.50 percent with a SD of
3.The RF is 5%.Which portfolio has performed as the best?

Treynor’s Performance Index:

Tn = Rp –Rf
βp
Treynor’s Index = Portfolio Average Return – Risk Free Rate of Interest
Beta co-efficient of Portfolio

6) The details of two hypothetical fund A & B are given below. Calculate
Treynor’s performance index.

Mutual Average Annual Riskless Rate Beta Risk

Funds Returns of Interest Premium
A 0.0879 0.05 0.499 0.0379
B 0.1347 0.05 1.2493 0.0847

7) The Following information is provided regarding the performance of the

funds namely Birla’s Advantage, Sundaram Growth and Sun F & C Value
for a period of six months ending August 2020. The risk free rate of
interest is assumed to be 9%. Rank them with the help of Treynor Index

Mutual Funds Average Annual Returns Standard Deviation Beta

Birla’s Advantage 25.38 4 0.23
Sundaram Growth 25.11 9.01 0.56
Sun F & C 25.01 3.55 0.59

8) Mr. Anand is having units in a mutual fund for the past three years. He
wants to evaluate its performance by comparing it to the market.
Particulars Fund Market
Returns 70.60 41.40
Standard Deviation 41.31 19.44
Risk Free Rate 2% 2%
β 1.12 ---

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 Programme: MBA Semester-III (CBCS- OUTCOME BASED)
Elective: Financial Management FM1: Investment Analysis & Portfolio Management
Module 5 : Portfolio Management

9) calculate Treynors Ratio on the basis of the results of four portfolio

managers for a 5 years period given below:
Portfolio Managers Average returns (%) Beta
Warren 14 0.80
King 17 1.05
Tony 17 1.25
Gates 15 0.90
Select the managers with best performance
Jensen’s Performance Index:

Jensen’s Alpha= Likely return- {RF+ Beta(RM-RF)}

Rp –Rf = αp + β (Rm –Rf)

OR
Rp = αp + Rf + β (Rm –Rf)

10) Calculate Jensons alpha on the basis of the results of four portfolio
managers for a 5 years period given below:
Portfolio Managers Average returns (%) Beta
Warren 14 0.80
King 17 1.05
Tony 17 1.25
Gates 15 0.90
Select the managers with best performance)
11) The following tables given the portfolio return and the market return.
Rank the performance using Jensen’s Performance Index
Portfolio Rp β Rf
A 15 1.2 5%
B 12 0.8 5%
C 15 1.5 5%
Market Index 12 1.0 5%
12) Mr. X has been owning units from three different mutual funds
namely R,S & T. The following particulars are available to him. He wants
to dispose any one of the mutual fund for his personal expenditure.
Which fund should be dispose? Use Jensen’s Performance Index.
Funds Excess average return Beta
R 7.7 1.02
S 11.3 0.99
T 11.6 1.07
Market 7.8 1.00
13) Alpha and Beta Co-efficient for five stock are given below:
Stocks Alpha Beta
Craft Corporation 1.0 0.8
Crown Corporation 1.35 1.15

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 Programme: MBA Semester-III (CBCS- OUTCOME BASED)
Elective: Financial Management FM1: Investment Analysis & Portfolio Management
Module 5 : Portfolio Management

Courtesy Corporation 1.18 1.25

Cute Corporation 1.25 0.95
Care Corporation 1.5 1.4
Rank the five stock using Jensen’s Performance Index.

14) The following results were obtained from a study for a period of six
months in 2020.
Particulars Rp σp β
Birla Advantage Fund 25.38 4.0 0.23
ICICI Growth Mutual Fund 36.28 6.86 0.52
Alliance Equity Fund 45.56 4.31 0.63
Sensex 50 36.74 3.69 1.00
Rf 9.00 -- ---
Using the above information rank the funds according to the predictive
ability of the funds management.

15) Pearl & Diamond are the two mutual funds. Pearl has means success
of 0.15 and diamonds has 0.22.The diamond Had double the beta of
Pearl funds 1.5.The standard deviation of Pearl and Diamond funds are
15% & 21.43%.The mean return of market index is 12% and its standard
deviation is 7. The risk free rate is 8%.
a) Compute Jensen Index for each fund.
b) Compute the Treynor and Sharpe indices for the funds and
interpret the results.